How much do the settlements really cost?

Founding of Kedumim 1975  photo: GPO

Israel has no separate budget for expenditure beyond the Green Line, so the answer depends on whom you talk to.

The Herzliya Conference, June 2014. Then Minister of Finance Yair Lapid is speaking. Lapid's political and economic zig-zags have taken him some way from the position he took then, when his theme was the cost of the settlements in the West Bank (Judea and Samaria). "Somewhere between Itamar and Yitzhar," Lapid said, "the money is buried that could have been used to bring us smaller school classes, better health services, less inequality in Israeli society, and also Iron Dome and Arrow 3 and a stronger IDF." Lapid added that "these settlements are expensive for us", and said that they cost the State of Israel billions.

Accurate statistics are not Lapid's strong point, but he is certainly not the only one who talks not just about the political and diplomatic cost of the settlements in Judea and Samaria, but also about their economic cost.

On the face of it, there is a simple document that makes the costs plain. As is well known, Israel receives annual aid in the form of US loan guarantees to the tune of billions of dollars. Since the US (at least until the advent of Donald Trump, whose future policy on the matter is uncertain) opposes the development of settlements in Judea and Samaria, it was agreed between the two countries that the amount invested in settlements would be deducted from the guarantees. The Ministry of Finance therefore produces such a calculation every year and sends it to the US. The numbers reported since 2003 are as follows (in millions of shekels):

2003: 1,721.4
2004: 1,015.9
2005: 930.3
2006: 883.0
2007: 940.6
2008: 773.3
2009: 760.7
2010: 817.5
2011: 1,123.4
2012: 1,050.8
2013: 939.0
2014: 1,053.3
2015: 990.4
2016: 263.9 (first quarter only)

The Ministry of Finance appends a document to the figures explaining how they are calculated. The document points out that in the government's accounts expenditure on the settlements is not set out directly, and so for each government agency the financial controller of the ministry concerned calculates for each budget item how much is spent on the settlements. The figures indicate that Israel invests about NIS 1 billion in the settlements annually, and one of the outstanding features is the dramatic drop from 2004 onwards, about which more below.

These Ministry of Finance figures, however, can only be a rough estimate. They are misleading in both directions. On the one hand, they include investment such as public buildings in the settlements, when clearly the residents of the settlements would need such buildings wherever they lived. On the other hand, investment in infrastructure such as roads between settlements is not included, on the grounds that such roads serve not just the Israeli settlers but also the Palestinians. Although this argument is factually correct, and the Palestinians do indeed use these roads at least as much as the Jewish Israelis on the West Bank, one might nevertheless wonder whether the State of Israel would embark on such projects if they served the Palestinians only. In fact, it can be assumed that they are meant to assist the settlers, and the benefit to Palestinians is a by-product.

In past years, there were large road building projects beyond the Green Line, such as the Cross-Samaria Highway, the Azun bypass, and others, but in recent years such projects have conspicuously diminished, certainly in comparison with the Galilee and the Negev, where huge interchanges have sprung up lately.

Defense expenditure is something else about which it is not clear whether it is part of the "settlements burden". This is where political outlook becomes the deciding factor. Peace Now has produced a calculation showing how the war against terror, the evacuation of Israelis from the Gaza Strip, and other activities that have cost many billions of shekels, all stem from the settlements. From the other side, the Yesha Council of the Communities of Judea and Samaria provides a calculation, which they admit is rough, of the price of the "plans of the left". According to them, recent military operations in the Gaza Strip and the evacuation of Israelis from there stem from political initiatives of the Labor and Kadima parties, and this calculation too comes to several billion shekels.

Setting aside for the moment the political arguments, and accordingly also IDF expenditure beyond the Green Line that is for the defense of Israelis in general, there are security expenses that relate directly to the settlements in Judea and Samaria. These too are not included in the calculation that the Ministry of Finance provides to the US. Among these are the expense of guarding the settlements themselves (in many settlements the burden of security is on the residents themselves or on civilian companies) and armored buses, which cost 1.3-1.5 times more than regular buses.

Subsidies for public transport beyond the Green Line can also be included. The amount is not high, some NIS 10 million annually, and its justification is that it encourages Jewish residents, particularly youngsters, not to hitch-hike. In the incident of the abduction and murder of the three youths in the summer of 2014, beyond the human tragedy, there is no doubt that had they chosen to travel by public transport and not to accept that fateful ride, not only would they still be alive, but military operations costing billions would probably have been avoided.

It is difficult to quantify the cost of the settlements, and those who are supposed to be experts on the matter and have been researching it for years, the Yesha Council, Peace Now and other organizations, have been unable to come up with a clear figure. The discussion with these opposed groups produces exchanges of accusations of concealing information.

"The finance for the settlements does not come from one source among the government ministries, but from various ministries," says Talia Sasson, today president of the New Israel Fund and formerly head of the special tasks department in the State Attorney's Office and the compiler of an (interim) opinion on unauthorized settlement outposts. "Planning is in the Ministry of Construction and Housing, infrastructure work is through the local councils, with the budget apparently being channeled through the Ministry of Construction and Housing. Power comes from the Israel Electric Corporation, water from Mekorot, and the Ministry of the Interior pays the local authority monthly. The money comes from all kinds of directions in all kinds of ways. If a new road is built, or a civilian guard is set up or a fence or a generator, the source is often the Ministry of Defense. This diffusion and the way that the money is transferred is part of the idea that there should be no single figure that anyone can point to and say 'that's the budget that goes to the settlements,'" she says.

From the other side come accusations of manipulation of the numbers. For example, according to a calculation by Peace Now of annual education expenditure per school student, the local councils in Judea and Samaria have the highest expenditure in the country. The education budget in Israel (excluding the settlements) is NIS 4,915 per student on average, whereas is Judea and Samaria it is dramatically higher, at NIS 8,034. The Yesha Council points out however that one factor that makes the difference is the gap in costs between local councils and regional councils, where an expensive transportation system is required, and this gap exists throughout Israel. Thus it turns out that the average expenditure per student in the Bet El local council in Judea, at NIS 4,425, is much lower than in the Eshkol Regional Council, where it is NIS 12,952, because the latter is between the Gaza Strip and Beersheva and has a small population scattered over a large area.

Netanyahu cut construction

The days of the Yitzhak Shamir government, when 10,000 housing units or more were built annually over the Green Line, are long gone. At the end of the 1990s and at the beginning of the 2000s there were still 3,000 construction starts annually on average in Judea and Samaria. Since then, the number has continued to fall, and, according to Yesha Council figures, the average number of building starts in the region has been 1,500 annually since 2009. According to Peace Now figures, 2,000 housing units have been built annually during Benjamin Netanyahu's period as prime minister, but Peace Now stresses that whereas under the Ariel Sharon and Ehud Olmert governments construction was mainly in concentrated blocks close to the Green Line, Netanyahu has built deeper inside the West Bank, indicating an attempt to make the eventual establishment of a Palestinian state less viable.

Can it be that the curtailment of the expansion of the settlements has happened during the terms of Netanyahu of all people? He is after all considered a right-wing ideologue, certainly the most right-wing prime minister since Shamir. It turns out that it can. Moreover, it was mentioned earlier that spending on settlements dropped in the period 2003-2004, and who was minister of finance in that period? The same Netanyahu. He wielded the sword of budget cuts not just against welfare services, but also against Judea and Samaria.

Substantial benefits were abolished in this context. For example, previously, when a new neighborhood was built in one of the settlements, the state bore the infrastructure costs. Preparing a plot for construction of a house alone costs NIS 200,000-250,000. Since 2004, however, the rules in Judea and Samaria have been the same as in Israel proper.

Hagit Ofran, head of the Settlements Watch Team at Peace Now, agrees that things have changed, but she still sees discrimination in favor of the settlers. "They are right when they say 'we're no longer so spoilt', but they still benefit from more of a welfare state than in Israel. For example, in the services they receive, because they are regional councils. Although there are such councils in the Galilee and the Negev, the services there are not good.

"The benefits for the settlements are not written in the budget, but they are in the criteria. How do religious schools receive more than secular schools? There are regulations, for example a post of school rabbi, which of course is relevant for religious schools. The regulations are such that they can be tailored to suit a particular place.

"In addition, the Ministry of the Interior provides balancing grants to local authorities. These are distributed according to criteria, such as a security grant for freezing construction, amounting to tens of millions of shekels. There is an Oslo grant arising from the territorial withdrawals under the Oslo Agreement with the Palestinians, that is still received, and a young settlement grant that applies only to the West Bank and the Golan Heights. One clear instance of an extra benefit relates to a synagogue that was demolished in Givat Ze'ev because it stood on private land. So as compensation the council was given NIS 5 million, which clearly was not just for building an alternative synagogue, which costs much less. All these grants amount over NIS 100 million annually."

Yigal Dilmoni, deputy director of the Yesha Council, says in response to Ofran's claims that only a quarter of the councils in Judah and Samaria are regional councils, and only a quarter of the population lives in them. As far as the grants are concerned, he says that the settlement freeze grant has ended and was intended to compensate for the huge damage that the freeze caused to developers and contractors that had started construction and to the councils. The settlement freeze lasted for ten months in 2009-2010.

Taking a broader view, Dilmoni says, "There are higher values than money. If I take the establishment of the state, from the point of view both of the expense and of the blood that was shed, it's not certain that it was economically worthwhile. If Ben Gurion had prepared an Excel sheet, he would have said 'It makes no economic sense to found the State of Israel.'

"That said, the settlement in Judea and Samaria is not an economic burden, but a strong and good economic support for the State of Israel. They say that the state transfers billions to the settlements. The Negev and the Galilee have a whole ministry, there is the Negev and Galilee Development Authority, there are government jobs in aid to the Galilee and the Negev. Just eighteen months ago, the state decided to invest NIS 1.25 billion in the area bordering the Gaza Strip. And before that, in a move that to my mind was right, the state decided to invest NIS 15 billion in the Arab communities. There is a state and it has interests and it is prepared to invest money in them. That doesn't mean that we are sitting on mountains of gold here. Those who live here work hard for a living. The poverty graph is similar here to that anywhere in Israel.

"It isn't settlers receiving money, but money that the state invests in Judea and Samaria. There has been a decline from NIS 1.7 billion in 2003 to about NIS 1 billion, despite the fact that the population has doubled in the past twenty years. That means that the money is not going to the settlers."

The story of the gradual cut in investment beyond the Green Line can be conveyed through the story of the World Zionist Organization Settlement Division set up thirty years ago to assist communities in Judea and Samaria because the World Zionist Organization and other international bodies carried out construction throughout Israel except in Judea and Samaria, in order to avoid overseas pressure. Ten years ago it was decided that it should also aid the Negev and the Galilee, and since then its budget has been divided between the three regions. Its investment beyond the Green Line started to decline in 2014, from NIS 84.6 million the previous year to NIS 62.5 million in 2016 and just NIS 1 million in the first quarter of this year. The difficulties in its operations arose from objections by the Deputy Attorney General. Recently, however, a solution has been found enabling it to resume its activity.

Isolated outposts

One important way in which the money does go to the settlements arises from the very fact that they are isolated communities with small populations.

Sasson: "The more remote and isolated settlements are, and roads have to be built to them used by small groups of people, the higher the cost per person. It's not the Jerusalem-Tel Aviv highway that half the country travels on, but just the residents of an outpost or a small settlement. And it isn’t just the roads, but all the infrastructure – water, sewage, landscaping, public buildings. With all these things, you create infrastructure for a small number of people.

"To that you have to connect the issue of the format of settlement of the West Bank. In Itamar, for example, outposts were set up right on the edge of the municipal boundaries of the settlement, which were considerably expanded in the mid-1990s, not out of consideration for the needs of Itamar but in order to control the territory. The outposts were intended to establish Israeli control, even though the number of residents was very small. So they set up several outposts on the edge of the municipal boundary. This form of settlement is very expensive. It's not concentration for urbanization reasons but the opposite, dispersion."

As far as industry is concerned, while benefits apply to much of the business activity because of the designation of the area as a Development Area A, even Peace Now acknowledges that benefits beyond this that existed in the past have officially been abolished, although the settlers' motivation dictates otherwise.

Ofran: "The Ministry of Construction and Housing still finances infrastructures everywhere in Israel, even if it's not a matter of government construction. A new neighborhood is built somewhere and it's called infrastructure development expenditure. The ministry finances the development for the local council, and when the council sells the house, a charge is made for development. In practice, this is a benefit for the councils.

"How does it come about that the Ministry of Construction and Housing invests more in the settlements? There is no decision that they should receive more as a development area, but what happens is that in a development area the money is spent only if there is a construction project. In the Negev there is less construction, perhaps because there is less demand there, while the settlers have more motivation to build. There is no decision by the government to build more, but that is what happens."

Government jobs

According to Ofran, there is additional covert government support through the decision on whom to employ in the public sector. "A study by the OECD attempted to determine how the state regards the settlements in comparison with Israel proper. Among other things, the study shows where the settlers work. What emerges? That if in Israel 10% of those in employment work in the public sector, in the territories the figure is 20%. Basically, that is how the government maintains them economically. At one time they would be found make-work jobs in the Jewish National Fund and all kinds of positions such as secretary, secretary's secretary, kindergarten teacher and so on. Today it works by hiring them in the public sector."

Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Founding of Kedumim 1975  photo: GPO
Founding of Kedumim 1975 photo: GPO
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